How stock exchanges circumvent legal barriers in China?

Despite high legal limits and prohibitions, the Chinese crypto trade continues to grow briskly. More and more stock exchanges are finding strategies to circumvent the hurdles of the authorities and defy impending penalties.

The fact that crypto exchanges in the Middle Kingdom are not easy, is known since autumn 2017 at the latest . Just over a year ago, Beijing had made hard bandages against unchecked money trading in the country and banned the operation of the stock market. Nonetheless, cryptocurrencies continue to enjoy great popularity in China – which also keeps the business of the stock exchanges flourishing.

As reported by the South China Morning Post , the legal barriers and prohibitions are detrimental to the business of Chinese crypto traders. Rather, more and more stock exchanges find detours and strategies to avoid the authorities.

The operators would resort to a variety of tools. On the one hand, rather than ceasing to operate, trading platforms would simply continue the business under new names and domains. One strategy is to use both foreign servers and officially locate their business abroad.


An example of this is the former Chinese market leaders OKCoin and Huobi. As reported last November , these are now called OKEx and Huobi Pro and operate from Hong Kong. By contrast, smaller stock exchange providers would continue to operate their business from within Germany, according to Swiss Post.

On the other hand, more and more Chinese exchanges would decentralize their own business and instead rely on so-called peer-to-peer solutions. The stock market mediates only buyers and sellers. They in turn trade with each other, relying on the services of payment systems such as the AliBaba subsidiary Ant Financial and foreign exchanges. For the purchase and sale of cryptocurrencies, the Chinese yuan will be converted into the value-stable cryptocurrency tether in order to conceal the transaction.

In addition, exchanges would use so-called Virtual Private Networks (VPN) to remain undetected and to call blocked foreign websitesIn August , the Chinese state media announced that they would block more than 120 foreign crypto exchanges for users of Chinese networks. With VPN connections, such locks can be bypassed.

According to numerous experts, it is almost impossible to stem the Chinese crypto trade. However, cryptocurrency trading in the Middle Kingdom remains a dance on the razor blade and anything but risk-free. Once convicted of unlawful cryptography, defendants face up to five years in jail under Chinese law. If the trade is interpreted as a financial fraud, the verdict is “life” – until 2015, the death penalty was even possible.

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